Questions Linger Around State Ag Commissioner's Election Campaign

You must enter the characters with black color that stand out from the other characters

RALEIGH, N.C. — A federal grand jury recently indicted two former campaign workers for State Agriculture Commissioner Meg Scott Phipps. As the federal investigation continues, questions linger about how the controversy will damage her effectiveness in office.

Phipps has not been charged and U.S. Attorney Frank Whitney
declined to say whether she might be a target of investigators.

"She has not been contacted by the U.S. attorney's office or
any of the investigators associated with the case, but she's
certainly willing to cooperate," said spokesman Mike Blanton, a
deputy commissioner who was interviewed for 3-1/2 hours by
investigators and testified to a grand jury.

Phipps' attorney, Roger Smith, said he couldn't comment about
the case, but Blanton said Phipps' attorneys had contacted the
federal prosecutors to tell them she was willing to talk to them.

As for Phipps' effectiveness to lead in the wake of the indictments, ranking members of the Senate agriculture committee said it must be a difficult time for her.

"As far as I know that work is still going on, but I know it's got to be hard for her. It's got to be a distraction for her," said Sen. Charles Albertson, D-Duplin.

"It is damaging and it does make it difficult and I do think that a serious cloud has been cast over her and her administration," said Sen. Austin Allran, R-Burke.

Two of Phipps' former aides were indicted this week by a federal
grand jury on fraud, extortion, money laundering and conspiracy
charges related to fund raising during and after Phipps' 2000
campaign.

Former campaign treasurer Linda J. Saunders was charged with 17
counts, including conspiracy, mail and wire fraud, extortion by a
public official, money laundering and structuring transactions to
avoid reporting them. Former commissioner candidate and assistant
commissioner Bobby McLamb was charged with two counts - extortion
by a public official and conspiracy to commit mail and wire fraud.

An initial appearance hearing for McLamb is scheduled for
Thursday, according to his lawyer, David Long. No hearing was
immediately scheduled for Saunders.

The indictment outlined a scheme in which the defendants
allegedly diverted campaign contributions intended for Phipps to
help pay some of McLamb's campaign debt. McLamb lost to Phipps in
the Democratic primary in 2000 and, when he then joined her
campaign, Phipps said she would help him repay what he owed.

During a hearing before the state Board of Elections last year,
Phipps repeatedly denied knowing about her campaign's payments
toward McLamb's loans.

But the indictment said Phipps called and wrote to Centura Bank,
where McLamb owed $75,000, asking that the loan be extended.

"My husband Robert and I are holding a series of fund-raisers
now and after the election in November to assist Bobby in retiring
this debt and feel we should have no trouble raising the money to
satisfy his debt to Centura Bank," Phipps wrote in an October 2000
letter to the bank.

During the elections board hearing, Phipps said she and her
husband talked with McLamb and a campaign contributor about helping
McLamb. But she said she never agreed to use her campaign money to
pay off McLamb's debt.

According to the 42-page indictment, the alleged crimes began
after an unnamed person in Phipps' campaign told McLamb the
campaign would help repay his debt. McLamb received the assurance
May 2, 2000 - the night of the primary - after he offered to
support Phipps in the general election.

The indictment said the Phipps' campaign diverted at least
$86,000 in contributions to repayment of McLamb's $100,000 debt.
McLamb had separate $75,000 and $25,000 bank loans and Phipps
called at least one bank asking that the loan be extended while her
campaign raised money for it, the document said.

Saunders, 43, a longtime assistant to Phipps, and McLamb, 42,
were accused of soliciting money they said would go toward retiring
Phipps' campaign debt. But state campaign finance reports filed by
the campaign didn't disclose the payments for McLamb.

Last year, the state Board of Elections fined Phipps' campaign
$130,000. The board said the campaign had taken $84,202 in cash
from donors it could not identify and more than $14,000 in illegal
corporate contributions.

Copyright 2011 by WRAL.com and the Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.